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Starting is Challenge for Gen Z Investment Choices, U.S. Bank

Gen Z is driven by values but overwhelmed by investing complexity, as revealed by a U.S. Bank survey, leading to a need for tailored financial guidance for this generation.

Key Points

  • Gen Z investors prioritize values and seek to invest in causes they care about, even with lower returns.
  • Economic challenges lead to increased pessimism among investors, prompting strategy adjustments.
  • Social media shapes young investors’ perceptions, but many struggle to start investing.
  • Gen Z trusts financial advisors and seeks guidance from family and online platforms, needing tailored advice for this generation.

A recent survey conducted by U.S. Bank has revealed the investment behaviors and attitudes of Generation Z (Gen Z), shedding light on a generation that is driven by values but overwhelmed by the complexities of investing.

The survey, which took place between May 12-24, 2023, involved 3,000 active investors and 1,000 aspiring investors from different generations.

Generational Values and Investment Preferences

According to the survey, 38% of Gen Z active investors define wealth as having a better quality of life.

Moreover, 65% of active Gen Z investors expressed a desire to invest in causes they care about, with 85% willing to accept returns significantly lower than the average return of the S&P 500. This willingness to sacrifice returns for values sets Gen Z apart from older generations.

Investors have been significantly affected by the current economic climate, as 34% of respondents expressed greater pessimism about their investments’ future compared to the previous year.

In response to recent economic developments, such as inflation, escalating interest rates, and soaring costs, 79% have altered their investment strategies in the last three months.

The survey also revealed alarming economic challenges, including a 169% increase in college tuition since 1980, a 540% rise in the average home price, and an average student-loan debt of $37,000.

Social Media Influence on Young Investors

The survey results also highlighted the significant influence of social media on young investors, with over 75% believing that investing looks easy due to social media.

However, despite this perception, 73% of Gen Z and 70% of Millennial investors are unsure where or how to begin investing. This disconnect portrays the gap between perception and reality in the world of investment for younger generations.

Gen Z investors exhibit a higher level of trust in financial advisors, with 62% expressing trust in them more than any other generation.

Additionally, 50% seek financial advice from family members, while 36% turn to YouTube. Interestingly, the survey found that only 6% of Gen Z investors do not compare their wealth and investment goals to others, in contrast to 26% of Gen X and 40% of Boomers.

Concluding Thoughts

“It’s no wonder they are unsure about beginning an investing journey. But despite these headwinds, they are passionate about investing in causes they believe in and are seeking financial guidance,” said Gunjan Kedia, vice-chair of Wealth, Corporate, Commercial, and Institutional Banking at U.S. Bank.

The survey’s findings emphasize the need for tailored financial guidance for younger generations as they navigate a unique economic landscape, driven by their values and aspirations.